[For more than 30 years, Sterlingwale, which was owned by the Ansin family, operated a textile dyeing and finishing plant at Fall River, Massachusetts. In early 1982, Sterlingwale ran out of cash and, as a result, began to liquidate the company. It laid off employees and sold part of its inventory. In July 1982, the firm's remaining assets were sold by a professional liquidator, and Arthur Friedman, the president of Fall River Dyeing, acquired Sterlingwale's equipment and real property through another Friedman company. On September 20, 1982, Fall River began hiring employees at the former Sterlingwale premises.
On October 19, the union demanded recognition from the new employer. At that time, 18 of the 21 individuals employed by Fall River Dyeing were former Sterlingwale employees. By January 15, 1983, the first shift at Fall River was in full operation, with 36 of the 55 employees hired being former Sterlingwale employees. By April 15, 1983, the workforce had expanded to 107 employees, with 52 being former Sterlingwale employees. The Board held that as of January 15, 1983, the company employed a substantial and representative complement of employees and that Fall River was a successor employer to Sterlingwale. It held that Fall River had violated Sections 8(a)(5) and (1) of the NLRA by refusing to recognize and bargain with the union once its successoral obligation arose.
The Court of Appeals for the First Circuit enforced the Board's order, and the Supreme Court granted certiorari.] BLACKMUN, J.... Fifteen years ago in NLRB v. Burns International Security Services, Inc., 406 U.S. 272 (1972), this Court first dealt with the issue of a successor employer's obligation to bargain with a union that had represented the employees of its predecessor. In Burns, about four months before the employer transition, the security guard employees of Wackenhut Corp. had chosen a particular union as their bargaining representative and that union had negotiated a collective bargaining agreement with Wackenhut. Wackenhut, however, lost its service contract on certain airport property to Burns. Burns proceeded to hire 27 of the Wackenhut guards for its 42-guard operation at the airport. Burns told its guards that, as a condition of their employment, they must join the union with which Burns already had collective bargaining agreements at other locations.
When the union that had represented the Wackenhut employees brought unfair labor practice charges against Burns, this Court agreed with the Board's determination that Burns had an obligation to bargain with this union.... ... We cited with approval, Board and Court of Appeals decisions where it "ha[d] been consistently held that a mere change of employers or of ownership in the employing industry is not such an ‘unusual circumstance' as to affect the force of the Board's certification within the normal operative period if a majority of employees after the change of ownership or management were employed by the preceding employer." Id., at 279....
In addition to recognizing the traditional presumptions of union majority status, however, the Court in Burns was careful to safeguard "‘the rightful prerogative of owners independently to rearrange their business.'" Golden State Bottling Co. v. NLRB, 414 U.S. 168, 182 (1973), quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 549 (1964). We observed in Burns that, although the successor has an obligation to bargain with the union, it "is ordinarily free to set initial terms on which it will hire the employees of a predecessor," 406 U.S., at 294, and it is not bound by the substantive provisions of the predecessor's collective bargaining agreement. Id., at 284.
We further explained that the successor is under no obligation to hire the employees of its predecessor, subject, of course, to the restriction that it not discriminate against union employees in its hiring. Id., at 280, and n. 5; see also Howard Johnson Co. v. Hotel Employees, 417 U.S. 249, 262, and n. 8 (1974). Thus, to a substantial extent the applicability of Burns rests in the hands of the successor. If the new employer makes a conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor, then the bargaining obligation of § 8(a)(5) is activated. This makes sense when one considers that the employer intends to take advantage of the trained workforce of its predecessor.
Accordingly, in Burns we acknowledged the interest of the successor in its freedom to structure itsbusiness and the interest of the employees in continued representation by the union. We now hold that a successor's obligation to bargain is not limited to a situation where the union in question has been recently certified. Where, as here, the union has a rebuttable presumption of majority status, this status continues despite the change in employers. And the new employer has an obligation to bargain with that union so long as the new employer is in fact a successor of the old employer and the majority of its employees were employed by its predecessor.... A. In Burns we approved the approach taken by the Board and accepted by courts with respect to determining whether a new company was indeed the successor to the old. 406 U.S., at 280-281, and n. 4.
This approach, which is primarily factual in nature and is based upon the totality of the circumstances of a given situation, requires that the Board focus on whether the new company has "acquired substantial assets of its predecessor and continued, without interruption or substantial change, the predecessor's business operations." Golden State Bottling Co. v. NLRB, 414 U.S., at 184. Hence, the focus is on whether there is "substantial continuity" between the enterprises. Under this approach, the Board examines a number of factors: whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers....
Although petitioner does not challenge the Board's "substantial continuity" approach, it does contest the application of the rule to the facts of this case. Essentially for the reasons given by the Court of Appeals, 775 F.2d, at 430, however, we find that the Board's determination that there was "substantial continuity" between Sterlingwale and petitioner and that petitioner was Sterlingwale's successor is supported by substantial evidence in the record. Petitioner acquired most of Sterlingwale's real property, its machinery and equipment, and much of its inventory and materials. It introduced no new product line.
Of particular significance is the fact that, from the perspective of the employees, their jobs did not change. Although petitioner abandoned converting dyeing in exclusive favor of commission dyeing, this change did not alter the essential nature of the employees' jobs, because both types of dyeing involved the same production process. The job classifications of petitioner were the same as those of Sterlingwale; petitioner's employees worked on the same machines under the direction of supervisors, most of whom were former supervisors of Sterlingwale.
The record, in fact, is clear the petitioner acquired Sterlingwale's assets with the express purpose of taking advantage of its predecessor's workforce. We do not find determinative of the successorship question the fact that there was a 7-month hiatus between Sterlingwale's demise and petitioner's startup. Petitioner argues that this hiatus, coupled with the fact that its employees were hired through newspaper advertisements-not through Sterlingwale employment records, which were not transferred to it-resolves in its favor the "substantial continuity" question. Yet such a hiatus is only one factor in the "substantial continuity" calculus and thus is relevant only when there are other indicia of discontinuity.
Conversely, if other factors indicate a continuity between the enterprises, and the hiatus is a normal start-up period, the "totality of the circumstances" will suggest that these circumstances present a successorship situation. For the reasons given above, this is a case where the other factors suggested "substantial continuity" between the companies despite the 7-month hiatus. Here, moreover, the extent of the hiatus between the demise of Sterlingwale and the start-up of petitioner is somewhat less than certain. After the February layoff, Sterlingwale retained a skeleton crew of supervisors and employees that continued to ship goods to customers and to maintain the plant. In addition, until the assignment for the benefit of the creditors late in the summer, Ansin was seeking to resurrect the business or to find a buyer for Sterlingwale. The Union was aware of these efforts. Viewed from the employees' perspective, therefore, the hiatus may have been much less than seven months.
Although petitioner hired the employees through advertisements, it often relied on recommendations from supervisors, themselves formerly employed by Sterlingwale, and intended the advertisements to reach the former Sterlingwale workforce. Accordingly, we hold that, under settled law, petitioner was a successor to Sterlingwale. We thus must consider if and when petitioner's duty to bargain arose. B. In Burns, the Court determined that the successor had an obligation to bargain with the union becausea majority of its employees had been employed by Wackenhut. The "triggering" fact for the bargaining obligation was this composition of the successor's workforce. The Court, however, did not have to consider the question when the successor's obligation to bargain arose: Wackenhut's contract expired on June 30 and Burns began its services with a majority of former Wackenhut guards on July 1.
In other situations, as in the present case, there is a start-up period by the new employer while it gradually builds its operations and hires employees. In these situations, the Board, with the approval of the Courts of Appeals, has adopted the "substantial and representative complement" rule for fixing the moment when the determination as to the composition of the successor's workforce is to be made. If, at this particular moment, a majority of the successor's employees had been employed by its predecessor, then the successor has an obligation to bargain with the union that represented these employees.
This rule represents an effort to balance "‘the objective of ensuring maximum employee participation in the selection of a bargaining agent against the goal of permitting employees to be represented as quickly as possible.'" 775 F.2d, at 430-431, quoting NLRB v. Pre-Engineered Building Products, Inc., 603 F.2d 134, 136 (CA10 1979). In deciding when a "substantial and representative complement" exists in a particular employer transition, the Board examines a number of factors. It studies "whether the job classifications designated for the operation were filled or substantially filled and whether the operation was in normal or substantially normal production." See Premium Foods, Inc., v. NLRB, 709 F.2d 623, 628 (CA9 1983).
In addition, it takes into consideration "the size of the complement on that date and the time expected to elapse before a substantially larger complement would be at work ... as well as the relative certainty of the employer's expected expansion." Ibid. Petitioner contends that the Board's representative complement rule is unreasonable, given that it injures the representation rights of many of the successor's employees and that it places significant burdens upon the successor, which is unsure whether and when the bargaining obligation will arise. According to petitioner, if majority status is determined at the "full complement" stage, all the employees will have a voice in the selection of their bargaining representative, and this will reveal if the union truly has the support of most of the successor's employees.
This approach, however, focuses only on the interest in having a bargaining representative selected by the majority of the employees. It fails to take into account the significant interest of employees in being represented as soon as possible. The latter interest is especially heightened in a situation where many of the successor's employees, who were formerly represented by a union, find themselves after the employer transition in essentially the same enterprise, but without their bargaining representative. Having the new employer refuse to bargain with the chosen representative of these employees "disrupts the employees' morale, deters their organizational activities, and discourages their membership in unions." Franks Bros. Co. v. NLRB, 321 U.S. 702, 704 (1944).
Accordingly, petitioner's "full complement" proposal must fail.... We conclude, however, that in this situation the successor is in the best position to follow a rule the criteria of which are straightforward. The employer generally will know with tolerable certainty when all its job classifications have been filled or substantially filled, when it has hired a majority of the employees it intends to hire, and when it has begun normal production. Moreover, the "full complement" standard advocated by petitioner is not necessarily easier for a successor to apply than is the "substantial and representative complement."
In fact, given the expansionist dreams of many new entrepreneurs, it might well be more difficult for a successor to identify the moment when the "full complement" has been attained, which is when the business will reach the limits of the new employer's initial hopes, than it would be for this same employer to acknowledge the time when its business has begun normal production-the moment identified by the "substantial and representative complement" rule. We therefore hold that the Board's "substantial and representative complement" rule is reasonable in the successorship context....
C. We also hold that the Board's "continuing demand" rule is reasonable in the successorship situation. The successor's duty to bargain at the "substantial and representative complement" date is triggered only when the union has made a bargaining demand. Under the "continuing demand" rule, when a union has made a premature demand that has been rejected by the employer, this demand remains in force until the moment when the employer attains the"substantial and representative complement." See, e.g., Aircraft Magnesium, 265 N.L.R.B., at 1345, n. 9; Spruce Up Corp., 209 N.L.R.B., at 197.... The judgment of the Court of Appeals is affirmed. It is so ordered. POWELL, J., joined by C. J. BURGER and J. O'CONNOR, dissenting ... ...
The Court acknowledges that when petitioner completed the employment of its anticipated workforce in April 1983, less than 50 percent of its employees formerly had worked for Sterlingwale. It nevertheless finds that the new company violated its duty to bargain, because at an earlier date chosen by the Board, a majority of the workforce formerly had worked for Sterlingwale. The NLRB concluded that even though petitioner was still in the process of hiring employees, by the middle of January it had hired a "substantial and representative complement," when its first shift was adequately staffed and most job categories had been filled.... ... [U]nless the delay or uncertainty of future expansion would frustrate the employees' legitimate interest in early representation-a situation not shown to exist here-there is every reason to wait until the full anticipated workforce has been employed.... ... The decision today "balances" these interests by over-protecting the latter and ignoring the former.
In an effort to ensure that some employees will not be deprived of representation for even a short time, the Court requires petitioner to recognize a union that has never been elected or accepted by a majority of its workers...
Case Questions
2. Did the fact that there was a seven-month hiatus between the shutdown of Sterlingwale and the start-up of Fall River demonstrate that Fall River was not a successor?
3. At what point in time does the Board determine whether a new employer's workforce is made up of a majority of employees of the predecessor?
4. When did the dissenting Justices believe the majority status should have been determined?